The District Court Noord-Nederland recently allowed the trustees in bankruptcy of Northsea shrimp trading company Heiploeg to recover part of a EUR 27 million cartel fine from a former director.
Internationally, the question whether companies can recover competition law fines through civil claims against individuals involved in the competition law infringement, is controversial. The court held, however, that the director’s personal involvement in the infringement amounted to ‘serious mismanagement’, triggering personal liability to pay damages.
Since the director had held his position with the company for 48.05% of the duration of the infringement, the court only awarded damages equaling a pro rata part of the fine. Those damages must be further reduced by the ‘contribution share’ of the defendant’s co-directors in accordance with article 6:14 of the Dutch Civil Code (cf. Article 19(1) of Directive 2014/104/EU).
In 2013, the European Commission imposed fines totaling almost EUR 29 million on four Northsea shrimp trading companies: Heiploeg, Klaas Puul, Kok Seafood (all of the Netherlands) and Stührk (of Germany). The Commission found that these companies had breached Article 101 TFEU by agreeing to fix prices and share sales volumes of North Sea shrimps in Belgium, France, Germany and the Netherlands. Of the four addressees, Heiploeg was (by far) the most heavily hit; its fine amounted to EUR 27,082,000. In 2014, the company was declared bankrupt.
In the course of the bankruptcy proceedings, the trustees sought to recover the losses associated with the cartel infringement from company directors who had been involved in the infringing conduct. Most of these directors settled with the trustees, but the defendant did not. Consequently, the bankruptcy trustees sued the defendant for ‘directors' liability’ under article 2:9 of the Dutch Civil Code and, more generally, for negligence under article 6:162 of the Dutch Civil Code.
In its decision, the District Court upheld the trustees’ claim based on article 2:9 Dutch Civil Code. The court found that the defendant played an important role in the price-fixing arrangements and had personally caused the Heiploeg company to violate EU competition law. The defendant could and should have foreseen that his conduct could lead to fines and/or other serious financial and reputational damage, which could result in Heiploeg failing to perform its obligations vis-à-vis creditors of the company. In short, the defendant was found guilty of 'serious mismanagement', for which he can be held liable to pay damages. However, after the defendant retired from the board of directors in 2004, the infringement continued until 2009. Therefore, the court decided to hold the defendant liable only for a 48.05% share of the fine imposed by the European Commission, reflecting the duration of his tenure during the infringement period.
Internationally, the question whether companies can recover competition law fines through civil claims against individuals who were involved in the competition law infringement, is controversial. In Safeway Stores Ltd./Twigger, the English Court of Appeal held that the maxim of “ex turpi causa” prevents a company from recovering for damage which is the consequence of his own criminal or quasi-criminal act. And since liability for competition law fines is personal to the relevant undertakings, “they are personally liable to pay those penalties and it would be inconsistent with that liability for them to be able to recover those penalties in the civil courts from the defendants”. In the Netherlands, however, the courts are less adverse to the notion that companies recover (part of) criminal and quasi-criminal fines imposed on them from the individual officers and employees who were personally involved in the (quasi-) criminal conduct. Cf. also the decision of the Arnhem Court of Appeal of 11 January 2011, in which a company that had been criminally prosecuted for breaching the UN trade embargo against Iraq recovered half of the fine from a former director in civil court.
Finally, the damages awarded against the defendant will be reduced by the ‘contribution share’ of the defendant’s co-directors with whom the trustees reached a prior settlement. This reduction, which was agreed in that settlement in accordance with article 6:14 of the Dutch Civil Code, protects the settling co-directors against future contribution claims. Cf. also Article 19(1) of Directive 2014/104/EU, which states that “following a consensual settlement, the claim of the settling injured party is reduced by the settling co-infringer's share of the harm that the infringement of competition law inflicted upon the injured party”.
This article was published in the Competition Newsletter of October 2020. Other articles in this newsletter: